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forbearance

I’m still waiting for my compatriot, Harold Feld, to address how the FCC should reconcile its conclusion that forbearance is never warranted for terminating monopolies with its conclusion the same year that Internet service providers are terminating monopolists with respect to Internet content providers. In the meantime, he published a blog analogizing the FCC’s decisions in its automatic roaming orders to reclassifying broadband as a Title II service while forbearing from price regulation.

While analogies are often useful, this one is flatly misleading. The FCC’s automatic roaming orders merely followed existing precedent, both with respect to their decisions regarding “classification” and their decisions regarding the application of price regulations under Title II. They didn’t classify (or reclassify) anything in the first instance or depart from the FCC’s previous approach to regulating mobile voice services under Title II or its general approach to broadband services under Titles I and III. (I know, because the FCC’s first automatic roaming order was decided while I was Wireless Bureau Chief.) Read More

CBIT filed the following reply comments in the FCC’s net neutrality proceeding. You can download them HERE.

Executive Summary

The Communications Act of 1934 (the “Act”) was adopted in an environment where there was no significant competition among telephone networks. The absence of competitive alternatives raised significant concerns that the telephone monopoly would charge unreasonable rates or engage in unreasonable discrimination. Congress chose to constrain this monopoly through Title II of the Act, which requires that common carriers provide service at just and reasonable rates subject without unjust or unreasonable discrimination.

In the monopoly era, the “centerpiece” of the Title II regulatory scheme was the tariff filing requirement in § 203, which requires that common carriers file their rates with the Federal Communications Commission (FCC) and charge only the filed rate. The ‘filed rate doctrine’ “forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority.” Once a filed rate is approved by the governing regulatory agency, it is reasonable per se and cannot be challenged in court.

Much of Title II and the Act’s procedural and administrative provisions “are premised upon” this tariff filing requirement. Once the FCC began permitting new entry into telephone markets in the late 1960s and early 1970s, however, it discovered that the costs of tariff filings outweigh their benefits in markets that are subject to competition.

The FCC’s greatest challenge over the last three decades has been the adaptation of a regulatory scheme premised on anticompetitive tariff filings to competitive markets. This challenge has been greatest with respect to the Internet. The history of Internet regulation is riddled with ‘temporary’ exceptions that never ended, anti-competitive arbitrage schemes, and judicial remands. The still indeterminate regulatory status of voice-over-Internet-protocol (VoIP) is a continuing reminder of the difficulty in regulating services that use Internet Protocol (IP) under the Title II.

Attempting to reclassify broadband Internet access as a ‘telecommunications service’ subject to Title II would likely make an already difficult challenge significantly more difficult. Reclassification would be legally suspect and would almost certainly be subject to a strong challenge in court. The plain language of the Communications Act and regulatory history make clear that the term ‘telecommunications’ refers only to transmissions that are interconnected with the public switched network (PSTN), and does not apply to transmissions over broadband Internet access facilities (e.g., xDSL and cable modem). The Act defines ‘telecommunications’ as a (1) transmission (not facilities), (2) between or among points specified by the user, (3) of information of the user’s choosing, (3) with no change in the form or content of the information sent and received. Broadband Internet access services do not meet all four elements of the definition of ‘telecommunications’: (1) there are no defined points for transmissions over the broadband Internet, (2) broadband Internet access services do not limit the transmission of information to that specified by the user; and (3) broadband Internet access services introduce changes in the form and content of the information sent and received throughout the transmission. Read More

This is the third post in the CBIT net neutrality series. Previous posts in the series are available HERE and HERE.

The previous post in this series concluded that the gatekeeper theory of net neutrality regulation is radically over-broad under Title II and inconsistent with the competition theory of communications regulation set forth by Congress in the Communications Act. The proponents of Title II reclassification are trying to sell the FCC on the idea that forbearance is the solution to this over-breadth problem.

What they are really selling is a pig in a poke. It is unlikely that the FCC could grant forbearance from certain Title II tariffing requirements under the FCC’s current regulatory standard, and the net neutrality proponents who are selling forbearance as a solution haven’t indicated that they would actually support it. To the contrary, they have implied that reclassification would result in the regulation of broadband as a public utility.

This is the first in a series of net neutrality posts that will address fundamental questions presented by the prospect of applying per se net neutrality rules under Title II.

There is more at stake than net neutrality in the reclassification debate at the Federal Communications Commission (FCC). Imposing per se prohibitions against business-to-business arrangements involving ‘paid prioritization’ under Title II would be a radical departure from the core principles embodied in our communications laws. Yet the nature of this departure and its predictable consequences have received little attention thus far. That must change.

By its own logic, the theory of ‘gatekeeper control’ the FCC relied on to justify its imposition of per senet neutrality rules extends to any Internet intermediary that is capable of blocking, degrading, or favoring particular Internet services, applications, or content. If the FCC were to apply this theory under Title II, it would be required to impose net neutrality obligations on a host of Internet companies that have not been subject to common carrier regulation, including Google, Apple, and Netflix.

Summary of Regulatory Theories Governing Communications

A brief review of the prevailing theories of communications regulation in different eras is helpful in understanding why many companies that are considered ‘edge’ providers today would inevitably be subject to common carrier regulation if the FCC imposes per senet neutrality regulations under Title II. These theories are either embodied in the Communications Act or, with respect to net neutrality, in an FCC order.

Natural Monopoly Era. The Communications Act of 1934 presumed that telephone service was a natural monopoly. As implemented by the FCC, the 1934 Act subsidized uniformly low rates for residential telephone service through tariff filings.

Competitive Era. The Telecommunications Act of 1996 presumes that removing barriers to entry enables competition among communications services and envisions an era in which market-based competition completely supplants Title II regulation as the means of protecting consumers. The 1996 Act promotes competition and reduces regulation by removing barriers to entry.

Net Neutrality Era. The Open Internet Order presumes that Internet companies must have ‘neutral’ access to all end users on all Internet platforms at all times in order to survive, irrespective of competition. Per senet neutrality rules regulate gatekeepers in order to subsidize access to end users for upstream Internet companies, who are presumed to pass their resulting benefits on to all end users. Read More

The Center for Boundless Innovation in Technology (CBIT) submitted initial comments in the FCC’s net neutrality proceeding on Friday. CBIT’s comments addressed two issues: (1) the FCC lacks legal authority to reclassify broadband services, and, (2) if the FCC did reclassify, forbearance from tariffing broadband Internet access services would be difficult for the agency to justify based on its current precedent.

The executive summary of the comments is posted below, and the entire comments can be downloaded HERE. Read More

Today marks the seventeenth birthday of the Telecommunications Act of 1996. Since it became law nearly two decades ago, the 1996 Act has largely succeeded in meeting its principal goals. Ironically, its success is becoming its potential failure.

By the time most teenagers turn seventeen, they have already begun planning their future after high school. Their primary school achievements are only a beginning in a lifetime of future possibilities. For most legislation, however, there is no future after the initial goals of Congress are achieved. Fortunately, the seventeen year-old 1996 Act isn’t like most legislation.